As the holiday season approaches, toy retailers are grappling with the potential impact of election fatigue on consumer spending. This uncertainty is prompting industry leaders to adopt a cautious stance regarding their fourth-quarter projections.
Mattel (MAT) Chairman and CEO Ynon Kreiz shared insights on the toy industry’s outlook during the Goldman Sachs Communacopia & Technology Conference on Monday. Kreiz noted that while the industry is expected to continue its decline, the downturn will be less severe than initially anticipated. “The industry is doing better than initially projected,” Kreiz said. “The fundamentals of the toy industry are very healthy.”
Despite some positive trends this year, including strong performances from Lego sets, Hot Wheels cars, and Fisher-Price toys, the toy sector is not experiencing explosive growth. Data from industry research firm Circana reveals that toy sales in the G12 countries decreased by 1% to $24.5 billion from January to June 2024. The average selling price of toys remained stable at $11.57, and only 4 of the 11 major toy categories saw sales growth, highlighting ongoing challenges.
A notable exception is the building sets category, which saw a 20% increase in sales during the first half of the year. Frederique Tutt, global toys industry adviser at Circana, commented on the stabilization of toy sales and expressed optimism for the upcoming holiday season. “As we move through the second half of the year and prepare for the holiday season, we expect to see more new products that will generate excitement for both children and adults,” Tutt said. She anticipates continued growth in categories such as building sets, plush toys, robotic interactive pets, and collectibles.
For Mattel, second-quarter sales declined by 1% year-over-year to $1.1 billion. However, adjusted earnings per share increased to $0.19 from $0.10 a year ago, thanks to cost reductions and share repurchases. Mattel projects full-year sales to remain relatively flat at $5.4 billion, with adjusted earnings expected to rise by 14% year-over-year, according to the midpoint of the company’s guidance.
Jefferies analyst Kylie Cohu acknowledged the challenges ahead for Mattel, noting that the company is facing tough comparisons from last year’s Barbie movie and a weaker movie slate for the upcoming year. Cohu has rated Mattel shares as a Hold.
The broader toy industry is poised for a pivotal end to the year as it navigates these uncertainties and prepares for the holiday shopping season.
